Financial Decisions as We Age

Elderly ladies doing yoga

As we age, we understand that our bodies will not function as efficiently as they did before. We aren’t surprised when our health-care providers suggest more preventative tests and monitor us more closely as we pass milestone birthdays.

Our ability to make financial decisions also changes with age. And, just as with our physical health, our financial health needs care and extra attention to stay in shape. Research shows that the peak of financial decision making occurs in our 50s, which makes midlife a key time to build a financial support team and, if you haven’t already, to start having frequent, detailed conversations about money with your loved ones.

Financial Decisions As We Age

None of us likes to think about losing mental sharpness. If we are lucky, we never have to deal with a serious illness such as Alzheimer’s disease, but even the healthiest among us will experience some decline in decision-making ability as we age, according to two NEFE-funded research projects from the University of Alabama-Birmingham and Columbia University.

It can be easy to dismiss the idea of cognitive decline as something that happens to other people, not to us or to our loved ones — until the warning signs become too blatant to ignore. Ideally, aging adults would recognize that they are having difficulty where once there was none and would work with their families to come up with a plan of action. But pride, denial and embarrassment can create blind spots that prevent even the most communicative families from seeing the warning signs, which can lead to acute financial consequences if left unchecked.

Impact of aging on financial decision makingWhat Can Go Wrong?

Research shows that when we reach about 60 years old, our ability to process new information starts to slow down. Every person is different, and the loss of cognitive ability can spread over decades, but there are some common signs to look out for in ourselves and our family members. It might take you longer to calculate a tip on the fly or to pay your bills. You might find that you overlook important clauses in financial documents or that your ability to perform everyday math slows down considerably.

Difficulty recognizing risky investments is one of the most potentially dangerous side effects of aging. Older people also can have a harder time spotting scams, so it is important to be diligent — especially when faced with an opportunity that seems too good to be true.

Aging Parents and Money

As parents age, family dynamics change and money topics that used to be off-limits to “the kids” necessarily become part of a whole family discussion. There are some obvious trigger points for these changes — for example, severe illness or the death of a parent. If you wait until such an event happens before even starting the conversation about your parents’ finances, you could find yourself stuck in more ways than one: from simple logistics, such as having the account numbers and access codes to their financial accounts in the event they are unable to pay their bills, to knowing what their wishes are for the managing their estate once they are gone.

If you live in a different city or state from your parents, it is even more important to check in on a regular basis and to get specific. You might help set up automatic payments so bills don’t fall behind, and consider getting “view only” access to your parents’ accounts if the situation seems to warrant it. Include the whole family to decide who will be responsible for what and work with your parents to establish advanced directives — not just their will and estate planning documents, but powers of attorney and medical care wishes if they should become incapacitated.

And keep in mind that singles, childless widows and widowers, estranged families and others need this assistance too. Professional caretakers and advisors can provide support where there is no family to step in, and we all can keep an eye out for neighbors and community members.

See the full Summer 2016 Digest or download the PDF.


  • Paul Golden

    Media Relations Director

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